Daily Times - Leading News Resource of Pakistan
Pakistan needs int’l donors to escape C/A deficit
By Razi Syed
KARACHI:
Pakistan will not come out from the current account deficit without going to international donors, experts said on Thursday. The deficit during July-September 2011 grew to $1.209 billion from $597 million in the same period last year, they added.
The move by Pakistan government to choose short-term gains over long-term economic stability is risky.
The total liquid foreign reserves held by the country stood at $16,678.9 million as of December 2, 2011.
Foreign reserves held by the State Bank of Pakistan stood at $12.86 billion while net foreign reserves held by banks (other than SBP) stood at $3.81 billion with total liquid foreign reserves to $16,67 billion.
The International Monetary Fund (IMF) loan repayments are also due to start from early next year but Federal Finance Minister Hafeez Shaikh said Pakistan would have no trouble repaying a loan of the IMF.
The two teams met in Dubai for Article IV consultations referring to annual talks the fund holds with each member government to assess the health of the economy from Nov 9-16, 2011.
The outcome of the meeting remained flat as the donors asked Pakistan to meet the demands laid down for the release of funds.
Pakistan had opted out of an extension of a three-year IMF $11 billion emergency loan programme. Pakistan asked the extension of the $11 billion loan programme and a new loan programme.
Pakistani officials repeated their request to the IMF officials to grant Pakistan two years grace period to pay back instalments of loans and principle amount by 2012.
The IMF has been steadfast on its stance and succeeded pressing Pakistan to meet its conditions for levying tax on the agriculture sector, enhance energy price and ensure implementation of general sales tax.
IMF had also indicated that the conditions for release of last tranche of $1.85 billion bailout package for Pakistan would be tougher, agriculture expert and Karachi Chamber of Commerce and Industry member Shakeel Ahmad said.
The IMF also put a proposal before the Pakistan that surplus cash crops would be kept under the IMF supervision, he added.
“This will be done in case Pakistan fails to follow the dictation of IMF for levying different type of taxes and increasing cost of utilities,” he added.
Pakistan will start paying $8 billion loan by 2012 and the process will continue till the next three years.
He said due to the continuous increase in energy prices, IMF agreed for releasing funds otherwise the donor would stop releasing remaining loan amount besides it was determined to start audit of the loans accounts.
The rulers on the behest of the IMF reviewed the domestic economy on many occasions by levying taxes and in case of failure the IMF would put tougher conditions for the release of loans, Ahmad maintained.
The IMF has also sought amendments to the State Bank of Pakistan’s act in order to provide the central bank with operational independence.
The IMF wants Pakistan to raise tax revenue from the present 10 percent of gross domestic product (GDP) to 15 percent by 2013, which is peril for our economy. The country’s foreign debt now stands at more than Rs 6,500 billion and in only two years 2008-09 alone, swelled to Rs 9,600 billion.
The country’s debt was recorded at Rs 10.890 trillion by August 2011 from Rs 5.799 trillion by March 2008, showing a net increase of Rs 5.091 trillion or 87.79 percent since formation of the current government.
As the government revenue is less than its expenditure, therefore borrowing of money from both sources would be a continuous phenomenon until revenue increases more than the expenditure.
The government was forced to intervene in the energy and commodity markets to keep prices from getting completely out of reach of the public. This burden of subsidies along with higher security-related expenditures exerted continuing pressure on the fiscal system and adjustment path was affected.
